E-commerce boom in India a matter of concern, says Goyal

Commerce minister Piyush Goyal this week slammed large e-commerce companies such as Amazon, questioning their business model of predatory pricing which has been affecting small businesses in the country.

At an event in New Delhi on Wednesday, Goyal hit out at Amazon saying that its investment of a billion dollars in India “is not a cause for celebration, as it is merely compensating for the losses incurred due to predatory pricing.”

“When Amazon says that they are going to invest a billion dollars in India, and we all celebrate, we forget the underlying story that the billion dollar is not coming in for any great service or any great investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year. They have to fill in that loss,” Goyal said, adding that “if you (Amazon) make ₹6,000 crore losses in a year, it smells of predatory pricing.”

Goyal was likely referring to claims made by the Confederation of All India Traders in 2021, when the trader association said Amazon paid $1.2 billion towards legal expenses during FY19 and FY20, Indian media reported.

The e-tailer had then denied the reports claiming that its legal costs formed a small part of the overall expenses, while clarifying that it had incurred ₹1,967 crore in total legal and professional expenses in FY20.

Questioning the losses Amazon suffered in India, Goyal said, “I would love to know which chartered accountants, professionals or lawyers get ₹1,000 crore, unless you are paying all the top lawyers to block them so that nobody can fight a case against you.”

To be sure, Amazon India marketplace business Amazon Seller Services had posted a 33% increase in net losses in FY23 to ₹4,854 crore, up from ₹3,649 crore the previous year.

The minister expressed his concerns over the growing influence of e-commerce on India’s traditional retail sector and its potential impact on employment, while pointing to the possibility that half of India’s market could become part of the e-commerce network in the next decade, a development he described as “a matter of concern.”

“In the race for market share, we must not cause disruption for the 100 million small retailers across the country,” Goyal said, adding that “this growth (e-commerce network) must be orderly, and citizen-centric.”

“Technology is a means to empower, innovate, and meet consumer requirements – sometimes more efficiently,” he said, while spelling out the need to “democratize the distribution of benefits amongst the larger section of society.”

Goyal underscored the importance of protecting India’s developing economy and supporting those who still need affirmative action.

“There’s a large section out there who still deserves our help. When it comes to jobs and opportunities for the future of India, I think all of us will have to play our part,” he said.

Reflecting on the broader implications of e-commerce, Goyal urged a dispassionate and data-driven analysis of its impact.

Drawing comparisons with western nations, Goyal noted the decline of traditional “mom and pop” stores in the US and Europe owing to the rise of e-commerce, while pointing out that Switzerland has a cautious approach to e-commerce.

“I’m not wishing away e-commerce. It’s here to stay,” Goyal said, “but we have to think very carefully and cautiously about its role. Is predatory pricing good for the country?”

The minister also expressed concerns about the impact of e-commerce on local businesses and employment, particularly in sectors such as pharmacies and mobile phone repair shops.